Tracker scandal bill may be ‘well above €1bn’

At least 5,000 more customers could be affected by the tracker mortgage fallout, while the final bill could be “well above” €1bn, according to the financial advisor who exposed the scandal, writes Pádraig Hoare

Padraic Kissane told TDs and Senators at the Oireachtas Finance Committee that he expected 5,000 cases from AIB-owned EBS, Ulster Bank’s former stand-alone First Active unit, as well as KBC Ireland to emerge when the final tally is counted.

EBS and First Active-affiliated personnel had not appeared before the committee to explain their role in the scandal but they should, he said. The committee agreed to invite the relevant personnel of EBS and First Active to attend a hearing on the tracker fallout.

Mr Kissane said up to 800 cases involving Bank of Ireland staff wrongly put on more expensive loans were also yet to be dealt with.

Mr Kissane said his previous predictions around numbers affected by the scandal had been dismissed at the time, but that he had been proven correct in every instance. There are currently 33,700 official cases of customers affected by the scandal, which happened when homeowners were wrongly put on more expensive loans.

Speaking after the hearing, Mr Kissane said he expected the final bill to go well above the approximately €900m set aside by the various banks to deal with redress and compensation of the affected customers.

“I think the final figure will certainly rise above €1bn. When you add in all these extra cases and the external factors such as legal and administration fees, which are extremely expensive, then it could be well above €1bn,” he said.

On top of the redress and compensation bill that will have to be paid to customers, Mr Kissane estimated €700m had been wrongly taken from customers by the various lenders during the timeframe of the scandal.

“That €700m was not only taken from customers but also the economy — an economy that needed it at the time,” he said.

The financial advisor told the committee that he also expected more cases to emerge from Danske Bank, which has so far had a relatively minor number of cases involved in the scandal. He told members that Danske Bank, which bought National Irish Bank in the Republic and Northern Bank in the North, had sparked a mortgage war.

Danske’s attempt to increase its market share by offering a cheaper loan-to-value product forced other banks to follow suit, he said.

He said that “Danske has a lot to answer for” and that he thought there would be more cases than the approximately 80 identified by the bank as part of the Central Bank probe into the tracker scandal.

“They are the lender that began the race to the bottom,” he said.

Mr Kissane said one aspect that had gone under the radar due to homeowners owing much more than they should was the amount raised by the various banks by charges covering direct debits that could not be paid.

“That is €10 every time for a direct debit rejection. How much was made from those direct debits? I would suggest a fortune,” he said.

The tracker fiasco occurred when customers were wrongly put on more expensive loans by 15 lenders, including the five biggest in Ireland. The Central Bank is conducting a review of two million mortgages, including dozens who lost their homes under many lenders.

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